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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Re: Try figuring out the Annual Property Operating Data (APOD) instead. Posted by onnie on February 16, 2003 at 10:51 PM In Reply to: Try figuring out the Annual Property Operating Data (APOD) instead. posted by Ward-CA- on May 25, 2002 at 7:45 AM : : Hi Ward, : : This doesn't have to do with foreclosures but it does have to do with real estate. Can you explain what "Gross Rent Multiplier" is and how to properly analyze this when considering a multi unit property? : : Thanks! : =•=•=•=•=•=•=•=•=•=•= : Mike, you don’t want to give a lot of credence to a Gross Rent Multiple. It’s a very generalized, lazy way of trying to determine if a seller’s price for income property is in a comparable range of other income properties that have recently sold. It’s simple because all you do is total up the complex’s annual gross income and then multiply it by a factor of 7, 8, or 9 to approximate it’s market value. Since it doesn’t take operating expenses into account it’s highly suspect. This approach reminds me of a story I once heard about how they weigh pigs in Texas. What they do is go out in a field and find a rock as big as the pig and then weigh the rock, since it’s much easier to handle than the pig!! : The way you really want to evaluate the attractiveness of the sales price of an apartment complex is by determining its Capitalization Rate or cap rate for short. It takes a lot more effort than multiplying the gross annual rents by a factor of 7, 8 or 9, but it’s much more reliable too. : To find a detailed, step by step explanation of the Cap Rate you’d need to get a book from your local library on investing in apartment properties. : Good luck. Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : : : Hi Ward, : : : This doesn't have to do with foreclosures but it does have to do with real estate. Can you explain what "Gross Rent Multiplier" is and how to properly analyze this when considering a multi unit property? : : : Thanks! : : =•=•=•=•=•=•=•=•=•=•= : : Mike, you don’t want to give a lot of credence to a Gross Rent Multiple. It’s a very generalized, lazy way of trying to determine if a seller’s price for income property is in a comparable range of other income properties that have recently sold. It’s simple because all you do is total up the complex’s annual gross income and then multiply it by a factor of 7, 8, or 9 to approximate it’s market value. Since it doesn’t take operating expenses into account it’s highly suspect. This approach reminds me of a story I once heard about how they weigh pigs in Texas. What they do is go out in a field and find a rock as big as the pig and then weigh the rock, since it’s much easier to handle than the pig!! : : The way you really want to evaluate the attractiveness of the sales price of an apartment complex is by determining its Capitalization Rate or cap rate for short. It takes a lot more effort than multiplying the gross annual rents by a factor of 7, 8 or 9, but it’s much more reliable too. : : To find a detailed, step by step explanation of the Cap Rate you’d need to get a book from your local library on investing in apartment properties. : : Good luck. Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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